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Chaikin's Money Flow Forex Technical Analysis and Money Flow Forex Trading Signals

Developed by Marc Chaikin

 

This an oscillator which measure the Accumulation/distribution of money that is flowing into and out of a currency pair.

 

The indicator is based on the fact that the nearer the closing price is to the high of the price, the more the accumulation of the currency pair.

 

Also the nearer the closing price is to the low of the price, the more the distribution of the currency pair.

Chaikin Money Flow Indicator

 

Chaikin's Money Flow will be positive if price consistently closes above the bar's midpoint with increasing volume.

 

However, if price consistently closes below the bar's midpoint with increasing volume the indicator will be negative.

 

 

Forex Technical Analysis and Generating Forex Trading Signals

 

Buy Signal

A crossover of above zero signifies accumulation of a currency pair. A value of above +10 is a buy/bullish signal. Values above +20 signify a strong upward trending market.

Buy Signal Chaikin Money Flow indicator

Buy Signal

 

Sell Signal

A Zero line cross of below zero signifies distribution of a currency pair. A value of below -10 is a short/sell signal. Values below -20 signify a strong downward trending market.

Sell Signal

Sell Signal

 

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Trend Line break with Chaikin’s money Flow

 

The money flow can be used to confirm trend line breaks or support/resistance level breaks.

 

If price breaks an upward trend line, Forex traders should then wait for a confirmation signal from the  indicator values of below -10.

trend line break sell signal

Trend Line Break - Sell Signal

 

If price breaks an downward trend line, Forex traders should then wait for a confirmation signal from indicator values of above +10.

trend line break buy signal

Trend Line Break - Buy Signal

 

 

Divergence Trading

A divergence between this indicator and price often signals a pending reversal in market direction. However as with all divergences its best to wait for confirmation signals before trading the divergence.

 

A bullish divergence signal occurs when price makes a lower low while the Chaikin Money Flow makes a higher low.

 

A bearish divergence signal occurs when price makes a higher high while the Chaikin Money Flow makes a lower high.

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